Next Tuesday, October 31, the U.S. Supreme Court will hear oral argument in the latest of a series of cases concerning the proper scope of punitive damages. Philip Morris USA v. Williamswas tried in Multnomah County Superior Court in 2002. Plaintiff Mayola Williams claimed that the tobacco company misled her deceased husband about the danger of smoking, and received an awarded of $79.5 million in punitive damages. Beginning with BMW v. Gore in 1996, the Supreme Court has issued a series of cases imposing Due Process clause limits on excessive punitive damages. The Williams case has a particular focus on the extent to which punitive damages can be awarded as punishment for harm to persons other than the parties to the action. The Court granted certiorari to address these questions:

1. Whether, in reviewing a jury's award of punitive damages, an appellate court's conclusion that a defendant's conduct was highly reprehensible and analogous to a crime can "override" the constitutional requirement that punitive damages be reasonably related to the plaintiff's harm.2. Whether due process permits a jury to punish a defendant for the effects of its conduct on non-parties.

The attorneys general from eight states, including Oregon, submitted a joint brief to the U. S. Supreme Court in an antitrust case that originated in Oregon and is set to be heard by the high court next month. In that case, Weyerhaeuser Corp. was found liable for engaging in an illegal buyer-side monopoly in the purchase of alder logs. The Oregonian reported that the states' brief opposes the argument by both Weyerhaeuser Corp. and the U.S. Department of Justice that the trial court's test for predatory bidding was too subjective and vague. The Oregon Business Litigation blog's previous coverage of the case can be found here.

The Tillamook County Creamery Association, a well-known maker of cheese and other dairy products, began using the TILLAMOOK mark for its products as early as 1918. It registered the mark with the US Patent and Trademark Office in 1921 and 1950. Years later, a different entity, the Tillamook Country Smoker began processing meat products. The general manager of the Creamery Association informed the Country Smoker that he did not object to the Country Smoker provided that it did not build a cheese factory.

The Country Smoker expanded and started selling its products under the name TILLAMOOK COUNTRY SMOKER in grocery stores as well as at the Tillamook Creamery. In 1985, the Country Smoker applied for a trademark. While the Creamery did not object, the PTO rejected the application because the mark was confusingly similar to the Creamery's TILLAMOOK mark. Nonetheless, the Country Smoker continued to use its mark without objection from the Creamery, and in 1995, the Country Smoker filed a new application that combined the words TILLAMOOK COUNTRY SMOKER with a ribbon design. The Creamery did not object and the PTO granted the registration. The Country Smoker later reapplied to register the words TILLAMOOK COUNTRY SMOKER and the PTO granted the registration over the opposition of the Creamery.

The Creamery began recording instances of actual confusion between the two marks in grocery stores. The Creamery then sent a cease and desist letter to the Country Smoker which prompted the Country Smoker to file a declaratory judgment action to seek a ruling that it was not infringing the Creamery's mark. The trial court ruled, in part, that the Creamery's objections to use of TILLAMOOK COUNTRY SMOKER were barred by laches (i.e., the expiration of the limitations period for filing a claim). In a recent ruling, the Ninth Circuit Court of Appeals agreed.

The appellate court ruled that the limitations period for laches starts from the time that plaintiff knew or should have known about its potential cause of action. The court found that the Creamery knew about the use of the infringing mark on complementary products in the same geographical area but did nothing for 25 years to prevent it. The Creamery argued that the delay in enforcement was excused by the doctrine of progressive encroachment, which allows a trademark owner to wait to sue a junior user until the junior user engages in direct competition. The Creamery claimed that the Country Smoker's sales expanded significantly in the late 1990s, making the infringement claim timely. The court held that the doctrine of progressive encroachment does not apply under these circumstances because the Country Smoker merely grew its existing business and did not expand into a new product market in competition with the Creamery.

The court also rejected the Creamery's argument that an injunction should issue to protect the public from inevitable confusion, holding that inevitable confusion is actionable only where the product is harmful or a threat to public safety, which was not the case here. Accordingly, the Tillamook Creamery was barred from asserting claims for infringement and from obtaining injunctive relief to stop the use of the TILLAMOOK COUNTRY SMOKER mark. This case may be found here.

Can an eBay seller be hauled into court in a distant state by a disappointed buyer? The answer is yes, at least if defendant uses the on-line auction site as his primary commercial marketing method. That was the conclusion reached recently by a federal district court judge in the Eastern District of Michigan. The Michigan plaintiff was the successful bidder on two paintings defendant offered for sale. Defendant accepted the purchase price but never shipped the paintings, and later offered a refund. Plaintiff demanded the paintings or their fair market value. Even though the seller conducted no business operations in Michigan, the court held he was subject to suit there. Relevant contacts with Michigan included a series of emails and phone calls between the parties, and defendant's acceptance of payment from Michigan. But most significantly, the seller's extensive use of the internet as his sole marketing channel meant that he should have expected to be subject to suit outside of his home state.Dedvukaj v. Maloney, 2006 WL 2520347 (ED Mich 2006).

Thanks to a pilot program that became effective on October 1, parties to business litigation in Oregon can now receive specialized treatment in their own "commercial court." The novel program operates under the auspices of the Lane County Circuit Court. The commercial court is designed to handle complex disputes that would be burdensome to the regular court docket. According to the program's Operating Statement, the commercial court will provide judges and litigants with mechanisms for "fair, efficient and expeditious management of commercial and business litigation." The court's features include assignment of each case to a judge with special expertise for all proceedings, and the posting of written decisions in commercial cases on the court's web site. Parties whose cases are assigned to the court must agree to participate in early alternative dispute resolution efforts, and to make an effort to conduct limited-issue discovery for the purpose of early dispositive motions or settlement. Cases pending outside of Lane County may under certain circumstances be transferred to the program by a motion for change of venue.At a conference yesterday sponsored by the Oregon Law Institute, new Chief Justice Paul J. De Muniz described the commercial court program as one of his initiatives to ensure that Oregon has a competent judicial system on which the business community and the public at large can rely.

The Oregon Court of Appeals recently decided Bill Sizemore's appeal of the multi-million dollar judgment the teachers' unions obtained against Sizemore's educational foundation and political action committee. American Federation of Teachers-Oregon, AFT, AFL-CIO v. Oregon Taxpayers United PAC (Or App October 4, 2006). The unions had successfully sued Sizemore's groups under Oregon's RICO statute claiming that the groups had engaged in racketeering activities in gathering signatures and filing forms in connection with two anti-union initiatives Sizemore sponsored in 2000.

The Court of Appeals affirmed the judgment against Sizemore's educational foundation, but reversed the judgment against his political action committee. Both Sizemore and the unions claimed victory from the Court of Appeal's decision. Sizemore also said, however, that he intends to ask the Oregon Supreme Court to review and reverse that portion of the decision adverse to him.

While the case is complex and the opinion technical, for non-combatants this portion of Judge Haselton's opinion is most instructive:

For generations of Oregonians, the initiative has been, and remains, a cherished legacy. It is not only part of our heritage but, as such, a vital, integral part of our political present and future . . . . The citizens who ratified the initiative in 1902 certainly never intended that it would confer a license for fraud and a shelter for "money laundering." The citizens of Oregon did not intend to trade governmental corruption for private corruption by individuals and interest groups.

This case is not about innocent participation in the initiative process; it is not about good faith mistakes or errors in judgment in the course of such participation. Rather, as pleaded--and as ultimately found by the jury--this case is about a calculated course of criminal conduct perpetrated for the express purpose of crippling, and even destroying, defendants' political opponents.

For the Oregonians of a century ago, the initiative process meant pure, "open" democracy--and (at least) most Oregonians would like to think that it still does. But this case involves the antithesis of that ideal: It involves cynical, criminal manipulation of the democratic process.

On October 10, 2006, the Bureau of Labor and Industries filed Notices of Proposed Rulemaking for amendments to Division 3 Civil Rights Rules. The proposed changes to OAR 839-003-0025 and OAR 839-003-0065 are intended to clarify time limitations for notifying respondents of civil rights complaints and for respondents to respond to civil rights complaints.

The proposed rules state that BOLI will provide a written notice to the employer within 30 days after an administrative complaint is filed. The rules impose a 14-day deadline on parties responding to the complaint. The 14-day response time, which runs from the date of the notice, as opposed to the date on which the notice is received, may provide inadequate time for some employers to investigate and submit a written response.

BOLI is accepting comments on the proposed rules until November 28, 2006. Comments may be mailed to Marcia Ohlemiller, c/o BOLI, 800 NE Oregon St. #1045, Portland Or. 97232 or emailed to Marcia.L.Ohlemiller@state.or.us.

When assessing liability for another company's corporate obligations, courts distinguish between a purchaser of stock and a purchaser of assets, typically imposing liability on the former but not the latter. When the liability sought to be imposed is an employment obligation, the scope of liability is often broader, and may result from either a stock purchase or asset transfer, depending on the circumstances. However, in a case of first impression, the Sixth Circuit held that neither a merger or transfer of assets is a necessary prerequisite to imposing successor liability under FMLA.

In Cobb v. Contract Transport, Inc., the plaintiff worked as a trucker for Byrd Trucking, driving a Philadelphia-Denver route for the United States Postal Service (USPS). The contract specified, among other things: (1) the type of truck required; (2) hiring criteria for truck drivers; and (3) the employees' wages, hours, and health insurance. When the USPS selected Contract Transport as the successful bidder for the Philadelphia-Denver route, Contract Transport hired drivers who had previously driven the same route for Byrd. Plaintiff drove the route in the same manner, making the same stops, and using the same transfer point for Contract Transport as he had for Byrd.

Several months after he started working for Contract Transport, Cobb became ill, requiring emergency surgery. Shortly after notifying Contract Transport of his need for medical leave, Cobb was fired for making himself "unavailable for work." He sued under FMLA, but the district court found him ineligible and dismissed the case because he worked for Contract Transport for less than 12 months, which is the minimum threshold for eligibility under FMLA.

On appeal, plaintiff argued that he was, in fact, an "eligible employee" because the three years he worked for Byrd counted toward his FMLA eligibility under the theory of successor liability. The Sixth Circuit agreed, reasoning that the FMLA implementing regulations do not require a merger or transfer as a precondition to imposing successor liability. Examining earlier cases that decided successor liability under Title VII and labor law, the court concluded that the courts "apply an equitable, policy-driven approach."

Successor liability is imposed in labor law if the court determines that it would be equitable to impose such liability considering 1) the defendant’s interest, 2) the plaintiff’s interest, and 3) federal policy embodied in the relevant statutes in light of the particular facts of the case and the particular duty at issue. See EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086, 1089-91 (6th Cir. 1974) (adopting labor approach to successor liability in a Title VII case).

The court in MacMillan deemed the following factors relevant in determining whether to impose successor liability:

(1) whether the successor company has notice of the charge; (2) the ability of the predecessor to provide relief; (3) whether the new employer uses the same plant; (4) whether there has been substantial continuity of business operations; (5) whether the new employer uses the same or substantially same workforce; (6) whether the new employer uses the same or substantially same supervisory personnel; (7) whether the same jobs exist under substantially the same working conditions; (8) whether [the defendant] uses the same machinery, equipment and methods of production; and (9) whether [the defendant] produces the same product.

MacMillan, 503 F.2d at 1094. These factors have since been codified in FMLA regulations at 29 CFR § 825.107.

Based on the FMLA regulation and prior cases, the Sixth Circuit reasoned that the duty to provide leave under FMLA has no relationship to a company’s physical assets. Rather, the duty "arises through statute and an employee’s tenure." Consequently, the court saw "no reason to hold that a merger or transfer of assets is a precondition to the imposition of the duty." Stretching this reasoning to the extreme, the court said:

Plaintiff has carried U.S.mail on the exact same route, with the exact same relay stops, for the past three years. In reality, it as if Plaintiff works for the USPS and not for one particular trucking company. Only the management, not the job, has changed.

The Cobb case is probably the most expansive reading of successor liability for employment obligations to date. While the case is not binding in the Ninth Circuit, companies should be aware that any merger, consolidation, asset purchase or other transaction that involves the continuation of business operations with the same employees may result in liability for the predecessor's employment obligations.